Unification: all VMs have the same "hardware" even if they're
running on different hardware.

Access and management tools allow VMs to be managed over the
network.

Utilization: most bare metal systems are under utilized. VMs
allow that resource to be recovered.

Fewer physical machines can improve reliability since there's
less

Of course, there are some cons:

It can be more complicated to set up.

Administrators have another layer to learn and work with.

Physical servers need lots of RAM.

It's a good idea to keep some headroom on each machine so that VMs
can be migrated when a physical box dies. This gets easier (and less
costly) as the number of physical boxes you're using grows. Here's my
analysis: The headroom you need is somewhat greater (20%) than 1/N
where N is the number of servers. So with 2 boxes, you can use about
40% of each machine and still be able to migrate everything from one
machine to the other in the case of problems. With 10 boxes, you can
load boxes up to 80% (as much as I'd do in any event) and still have
room to migrate a single bad server's VMs. XEN supports live
migration if you get the storage architecture right.